After 11 years of bringing you local reporting, the team behind the Vancouver Observer has moved on to Canada's National Observer. You can follow Vancouver culture reporting over there from now on. Thank you for all your support over the years!

Enbridge Northern Gateway pipeline: benefit to all Canadians or detrimental to other industries?

Respected economist Robyn Allan, former CEO of the Insurance Corporation of BC (ICBC), has said the country’s move towards an oil-based economy will have severe effects on sectors like manufacturing—a point Ontario Premier Dalton McGuinty reiterated last year during a public clash with Alberta’s Alison Redford.

“If all this rapid expansion of oil sands leads to a higher Canadian dollar, nobody in Canada ultimately can win,” Allan said.

When Redford called on Ontario and Quebec to stand up for the oil sands, McGuinty responded with a resounding “no”. Instead, he suggested that the high Canadian dollar —the “petro dollar” being driven up by demand for Western oil and gas—is hurting Ontario’s economy by making manufacturing exports less competitive internationally.

A high dollar driven by global oil demand

"The only reason the dollar is high (is because) it's a petro dollar, driven by the global demand for oil and gas to be sourced in Western Canada," McGuinty told the press. “That has knocked the wind out of Ontario exporters and manufacturing in particular. So if I had my preferences as to whether we had a rapidly growing oil and gas sector in the West or a lower dollar, I’ll tell you where I stand: with the lower dollar.”

The Premier later apologized for the harshness of his words, but his initial response sheds light on an important question for Canada. Are the oil sands good for Canada’s economy, or not?

“I think definitely in part we are suffering from the situation where the export of our natural resources, particularly crude oil, leads to upward pressure on the Canadian dollar. And as a result, that makes other sectors of the economy less competitive in terms of the exports,” said Allan. “[ McGuinty’s] absolutely right to be concerned, and all Canadians should be concerned. Even the oil industry should be concerned.”

Alberta oil a benefit to all of Canada: Harper

Others disagree. Prime Minister Stephen Harper touts Alberta’s oil industry as having vast economic benefits, not just for Albertans but for people across Canada. And in Redford’s words, “When we talk about oil sands, it’s not about what’s in Alberta’s best interests, it is about what’s in Canada’s best interests.”

The Alberta Premier has cited a report from the Canadian Energy Research Institute (CERI), which states that Ontario is actually profiting more from the oil sands than other provinces outside of Alberta. The report explains the “trickle-down” benefit to Eastern manufacturers as oil sands producers require materials and commodities like steel. CERI predicts that Ontario will reap about $63-billion in spin-off benefits, in addition to the 65,520 oil-sands-related jobs that are expected between 2010 and 2035.

According to Allan, the group’s analysis does not account for harm caused by the rising dollar. “The study [Redford]’s been citing only looks at the benefits that the oil sands are receiving, and not the costs to the rest of Canada,” Allan said. “That report is based on another CERI study that actually identifies a very strong correlation between oil prices and the Canadian dollar. So it actually says exactly what Premier McGuinty’s saying.”

Acknowledging the potential for inflation, that CERI report calls on the federal government to ensure the dollar stays low enough to prevent excessive economic damage. “While it is highly probable that the Canadian dollar will trade above par with the U.S. dollar, it is assumed that the Bank of Canada would intervene, to put downward pressure on the relative value of the Canadian dollar,” the study reads.

Canada’s “Dutch Disease”

More in Environment

Pavlof Volcano erupting in Alaska on March 26, 2016.

Flights cancelled in and out of Regina, Yellowknife after volcano in Alaska

VANCOUVER — More flights have been cancelled after a cloud of ash spewed from a volcano on the Alaska Peninsula. WestJet spokeswoman Lauren Stewart said the airline cancelled three flights from...
Canada geese mating ritual

Egg addling program shakes up Canada geese population in Okanagan

VERNON, B.C. — Airborne flocks of Canada geese can be symbols of beauty and freedom, but the mess they leave behind on landing can quickly foul parks and beaches. The Okanagan hosts large numbers of...
Speak up about this article on Facebook or Twitter. Do this by liking Vancouver Observer on Facebook or following us @Vanobserver on Twitter. We'd love to hear from you.